Since education makes a person more likely to leave your region, how do you justify your investment in human capital?

Monday, December 24, 2012

Income Per Natural

Migration is economic development. We can't see that because of our place-centric perspective. European Union crisis:

Now, the new right to work anywhere is bumping against old prejudices about crossing national lines. There are new strains in the partnership, with some Germans fretting about the influx and Spanish and Greek policymakers worried that their best hope for recovery is vanishing one plane ticket at a time. ...

... Germany’s gain is Spain’s loss, and Bernedo said that she has no plans to return — for now. In a few weeks, her husband and 5-year-old son will move to Germany, too. The Spanish Embassy has collaborated on programs to find work for its citizens in Germany, and every emigration eases the pressure on Spain’s frayed safety net. But some who stay put in Europe’s struggling countries have expressed frustration with Germany, saying it pushes austerity on its neighbors and reaps rewards for itself.

“Our country is really upset” about workers leaving, Bernedo said. “They’re thinking, ‘We’ve paid for their education, and now they’re producing for Germany.’ ”

Eubulides of Miletus, a Greek logician of the 4th century BCE, formulated a paradox known as the sorites (“heaps”): One grain of wheat is not a heap of wheat, and if one grain is not a heap then two grains are not a heap, and if two are not then three are not— therefore ten million grains of wheat do not constitute a heap. Eubulides’ purpose was to point out the inherent indeterminacy of the word ‘heap’. Of course there is a point, an inescapably arbitrary one, at which a collection of grains is a heap.

By the same token, there is a certainly a degree of migration at which migration becomes economic development for the people from a particular place. If sea levels were to rise just 7½ feet (2.3m), all 300,000 current residents of the low-lying nation of the Maldives would become emigrants. Income per resident (zero) would cease to contain information about Maldivians’ welfare, or the degree to which they produce, consume, or exchange goods and services. The question is not whether migration can be economic development, but rather at what point do we consider migration an important form of economic development? Only numbers can suggest an answer to this species of question.

The initial estimates made here do point toward an answer. Over a billion people live in countries whose collective income per capita would rise more than 10% if considered as income per natural rather than income per resident. Put differently, for those billion people departure from the country is one of the largest national “industries” in terms of its contribution to average material welfare per person of naturals. It is likely that by a reasonable international standard of poverty, two of every five living Mexicans who have escaped poverty did so by leaving Mexico; for Haitians it is four out of five. And on the order of tens of thousands of infant deaths are prevented each year for the sole reason that those infants’ parents left poor countries. Although there is no clear point at which migration becomes development, we suggest that by any reasonable standard a very large part of the developing world is already past that point.

This is not at all an abstract observation. Measuring economic progress as if migration is not a form of development leads to bizarre conclusions by making a line in the sand the only consideration. If a Nicaraguan woman working in Arizona sends $200 a month to her impoverished spouse in Nicaragua, that can spur ‘development’ by common wisdom. But if her spouse goes to join her in Arizona and acquires a $2,000 per month lifestyle, that is not considered ‘development’. The woman and her spouse would likely disagree. On the sending-country side, should the Federated States of Micronesia be subsidizing education that prepares its workers for the local labor market or the global labor market? The government will arrive at very different policies depending on whether or not it sees migration as a form of development.

James Scott’s (1998) Seeing Like a State profoundly illustrates how nation-states use statistics to reduce people’s lived reality to statistics amenable to state enumeration and control. Few developing-country governments arrange their interventions in such a way as to maximize the welfare of their people rather than their place. Likewise, few rich-country governments set their policies related to immigration or development assistance in due consideration of their effect on people rather than places. As long as most people stayed put and international welfare disparities were small, acting as if patches of ground had welfare of their own made little difference to people’s lives. But that era is ending, and we need to prepare the statistics to see the real, not imagined, world.

Emphasis added. Workforce development is local and, ironically, isn't focused on the economic welfare of people. It is focused on the economic welfare of a place. That may have made sense a few decades ago. Given globalization and increasing geographic mobility (e.g. urbanization), current workforce development practices are counterproductive. The migration from Spain to Germany isn't a problem. It's a solution.

To frame outmigration as a negative outcome, as brain drain, is ridiculous. Regions are engaged in workforce development that benefit local companies at the expense of people. Discouraging geographic mobility is the same as restricting access to higher education. Retention initiatives are, fundamentally, xenophobic.

But many ordinary Germans view their new neighbors with caution. A recent local television show about some of the Spanish engineers was called “Dr. Guest Worker,” a reference to a 1960s program that brought Turkish manual laborers to Germany without granting citizenship to them or their children. The Turkish workers never returned home, but many Germans never welcomed them, creating an underclass with fewer rights and fostering resentments that persist to this day.

There is a point to this exercise: Clemens and Pritchett want to call attention to the fact that migration has made a lot of migrants richer. Traditional measures of income tend to mask this fact. In rich countries, we usually ask whether migrants improve the lot of existing residents, not whether migration improves the lot of migrants. Meanwhile, the welfare of migrants rarely figures in debate in developing countries or in development institutions such as the World Bank, because the migrants have gone.

Simply because of the way the discussion is framed, the benefits to migrants tend to be ignored. Imagine a man who moves from earning 10,000 euros in Poland (an above-average wage) to 15,000 pounds in the U.K. (a below-average wage). Simple arithmetic says that he has reduced the average income of both countries; that could be true even if he has impoverished nobody and enriched himself a great deal.

Arriving migrants reduce the average income in the destination country. We ignore the gains and highlight the negative impact on a place.On a global scale, a person is making 50% more in wages. On a national scale, two places record a drop in average income. Brain drain is bad. Places develop, not people.